The economy always seems to be in a state of evolution. Millennials, who were born between 1982 and 2000, are a driving force in the latest phase. The “Experience Economy” is where goods and services are sold by emphasizing the affect they can have on people’s lives. Millennials as a group appear to place more importance on investing in experiences than buying things, in much the same way as they value time and relationships (subjects of other recent articles in this space). This reality represents an opportunity for independent financial advisors offering services to the largest generation in U.S. history.
How Millennials Define Success: The Experience
Millennials tend to define success differently than other generations. An online article by Under 30 Experiences states income levels are not as important to Millennials as how much freedom they have to live life on their own terms. Technology is a driving force which, among many things, makes it possible for workers to take care of their assignments virtually anywhere without being tied down to a set schedule in a fixed office. Technology also makes it easier than ever to start and own a business. Notably, Millennials are more inclined than their parents to change jobs for less money if they can work for a company that shares their values. “(Our parents) invested in houses, things, cars; reflection of the society where it was encouraged to buy a house and work with the same company for 20 years. That was ‘success’ 20 years ago,” writer Miles Rote noted. “Instead of spending time to make money to buy material things which can make you feel anxious or can be taken away from you, Millennials are investing in experiences that improve life and can never be taken away.”
The Experience Economy may be driven by Millennials who spend more in areas like fitness, dining out and entertainment than Generation X or Baby Boomers. But even those age groups appear to be jumping on board. A recent McKinsey consumer survey pointed to the main reasons for this new dynamic. “We see three key factors, which are particularly applicable to millennials but hold true among older consumer cohorts too: a more holistic perspective on what leads to happiness, the growing importance of social media, and an increasing fear of missing out.”
A U.S. News article reinforced the importance of social media and experience-related purchases. The article notes peer pressure is a likely cause since “Traveling to exotic places and doing things that are Instagrammable may be important to young adults who are constantly scrolling through news feeds of friends living apparently lavish lifestyles.” The article’s data also suggests Millennials shy away from traditional long-term goals like retirement saving or homeownership and toward spending that provides an immediate reward.
The Financial Advisor Experience
Independent financial advisors who better understand this trend in lifestyle and spending habits across the spectrum will be better able to serve clients in multiple generations. An area of focus should be helping Millennials and others plan their financial futures while avoiding mistakes. The U.S. News article suggested “Millennials should also ensure they are putting money into retirement savings each month. Saving for the future might seem difficult for a generation focused on memorable experiences and the present.”
The spending habits of the Millennial generation clearly differ from previous age groups. But different doesn’t necessarily equate to worse. Financial advisors who demonstrate their primary mission is to improve the lives of clients, no matter where they are on the financial spectrum, dovetails neatly with the mindset of the Millennials seeking great experiences. Advisors might consider asking Millennials and all their clients this question: What kind of retirement experience do you want?